Excise duty rates further reduced by two percent
On December 7, 2008, as a part of the stimulus package the excise duty rates were reduced by 4% by amending certain notifications through Notification 58/2008-CE dated December 7, 2008. Now in the current round, the duty rate is further reduced by 2%. However, this reduction of 2% is applicable only to goods which carry an effective rate of 10%. The goods which have an effective rate of 8%, 4% and Nil are left untouched this time around.
In terms of Rule 6(3) of the CENVAT Credit Rules 2004, a manufacturer opting not to maintain separate accounts for exempted and dutiable goods, has to pay 10% on the price of the exempted goods. This 10% was fixed when the peak rate of excise duty was at 16%. The excise duty rate is now reduced to 8%. Arithmetically the 10% under rule 6(3) should be now at 5% (half of the original 10%). Every time the excise duty rate is reduced, we have been reminding the Board that there should be a corresponding reduction in Rule 6(3), with no result. Now the penalty for not maintaining separate accounts is that the manufacturer has to pay 2% more duty on exempted goods at 10% while all other goods attract duty at 8%. How ridiculous! Why give an exemption at all when the exempted goods will attract 10% while non-exempted goods will suffer only 8%?
Notification No. Dated: February 24, 2009